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So much for filing your taxes on a postcard

Part 1 of a series

 

No, after the new tax law you will not be able to file your taxes on a postcard.  In fact, the tax law just got more complex, which should surprise no one. Keep in mind that the new law applies to 2018, and not to 2017, except in almost unnoticeable details.  

Tax law actually makes some sense if you know how it is written. The Internal Revenue Service has platoons of frisky young tax attorneys who come up with ideas to both generate revenue for Uncle Sam and also improve the enforcement process. These changes are proposed to Congress, and then the changes make it into law, or not.

Certain sections of tax law have been a problem for the IRS, as they have required a lot of inspection from Sam. Several of these troublesome areas were eliminated by the new law.   

Moving expenses will not be deductible in 2018. This is a rip-off, because employer reimbursement will still be included in your W-2, but you won’t be able to deduct the expense. So if the company moves you from Lakeville to Asheville, it will cost you. Not OK, as far as I’m concerned.  This unfairness will probably be corrected but not in time for some.  

Alimony for divorces final after Dec. 31, 2018 will not be deductible to the payer or taxable to the recipient. This change will increase the fervor of divorce settlement negotiations, but the IRS doesn’t  care about rising anguish in the divorce court. Alimony agreements final before the drop-dead date will follow the old law.   

A big groan is the death of “Job Expenses and Certain Miscellaneous Deductions” as an itemized deductions. This broad category includes union dues, job education, un-reimbursed business expenses, tax preparation, bank box fees and investment fees.  

The elimination of this section hits school teachers particularly hard, as they always buy supplies and usually pay handsome union dues. Many have requirements for continuing education, and most are still working long after the school is dark. This will be a loss for this group.

Also eliminated are investment fees, sometimes $30,000 in one year. Some investors will be willing to pay this amount without a deduction, but others will not, possibly causing displacement in the finance business. 

An additional issue is how un-deducted investment fees will affect the cost of stock when sold, as such fees are certainly part of the appreciation of stock.  Tax professionals are “awaiting clarification” on this and many other points, meaning we don’t know what Congress or the IRS meant by what they wrote.  

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Next time, we will talk about the $10,000 limit on state and local taxes. This category includes real estate taxes, income taxes and sales taxes, limiting the deduction to $10,000 in a year, regardless of income. This limitation increases tax revenue for Uncle Sam, and as a result, citizens of the Northeast may face higher tax bills in 2018.  

 

Martha Miller is a tax attorney who lives and works in Lime Rock.  None of the information presented here should be seen as an endorsement of her business.